The Leesburg Smart Grid: The Heart of the Problem

In 2007, Leesburg’s new utility management team identified that the main cause of the steady increase in electricity rates could be linked to the demand charges FMPA billed Leesburg. Upon close inspection, utility managers discovered that from 2006 to 2010 the average monthly FMPA “demand rate” billed to Leesburg increased significantly from $12.27 to $19.30 per kilowatt (kW.)

Understanding the root of this problem requires comprehending how the city’s wholesale electric rates are determined. Each month, FMPA determines its peak demand hour across the 14 ARP member utilities, levying a fee based on each individual municipality’s portion of the peak demand. Meanwhile, Leesburg’s overall load factor — average load divided by peak load — was below average, due primarily to the heavily residential customer base and lack of significant industrial load. Bottom line: The residents and small businesses of Leesburg were consuming too much of their electricity during what the FMPA was designating as the peak demand hour.

What this meant for customers was a demand charge averaging about $20/kW/month. This equates to about $80 per month, or 30 percent of a residential bill. For larger customers, this can be more than $10,000 a month.

Reducing Leesburg’s peak monthly demand presented two unique problems. One, in a city with a peak demand that regularly exceeded 100 MW, how could electricity use be curtailed enough to have a meaningful impact on the bottom line? Second, how could utility managers advise residents and businesses to reduce electricity usage during the appropriate time of day when FMPA was experiencing a system-wide peak demand hour?